I was born in Hong Kong and immigrated to US when I was young. I come back and visit every now and then (using my US passport), and replaced my old HK ID with the HK Smart ID during one of those visit.
I was in Hong Kong last year and wanted to apply for a Home Return Permit, but the people at CTSHK (香港中國旅行社) said I need to apply for a HK Passport first, a birth certificate is not sufficient.
After returning to US from that trip, I searched on CTSHK web site and it said an HK birth certificate IS sufficient.
So... I'm physically in HK right now, went to CTSHK physically twice and still couldn't even turn in my application form. Here's my story.
My first visit, they wouldn't give me a wait ticket because I didn't have a HK Passport (I had my HK Smart ID and HK birth certificate). I went home, applied for the HK Passport, and went to CTSHK again.
Second visit was actually today. I went with my HK Smart ID and my HK Passport. The clerk investigated my HK Smart ID and questioned why I got my ID late (I got it 4 years after my supposed replacement year), so I said I was in US studying, then she gave me another form to fill out to request verification of my Chinese citizenship. I waited 2 hours for my ticket number to be called, and the other clerk told me I need to bring my US Passport in order to file the verification. She said what it does is checking if I ever pledged to give up my Chinese citizenship, and the process would take 3 to 6 MONTHS. She said a lot of people like me (holding foreign passports) are coming back to apply for the Home Return Permit, that's why it takes so long. Anyway, I didn't have time to go back with my US Passport, so that's all I have... Hopefully it helps.
* According to wikipedia, "Officially speaking, if they have (HK residents with overseas citizenship) not made a 'declaration of change of nationality' at the Immigration Department of Hong Kong, they are regarded by the PRC authority as PRC citizens." *